The 400% Rally Very Few are Talking About

It seems like very few are talking about crude oil's 400% rally from the April lows. It wasn't there for very long but crude oil for June delivery traded as low as $6.50 on April 21st.

With prices up this much in such a short amount of time the question is, can it continue?

The oil market has seen many bullish developments lately with additional production cuts by Saudi Arabia, the UAE, Kuwait and a rapid decline in oil production in North America. 

Another factor helping the bullish case are efforts to re-open the US as well as other economies around the world. 

Markets are forward looking and as countries continue to "reopen" their economies there's a chance this rally might turn out to be a "buy the rumor, sell the news" event, if the reopening doesn't live up to expectations. 

The price of oil crashed but quickly found some footing by the end of April and has since trended higher with very few setbacks.

If you compare the performance of oil with the related stocks, there's a disconnect that could spell trouble in the short to medium term.

The US oil ETF XLE has nearly doubled since the March lows but the upside is starting to look limited as price has now rallied into an area of overhead supply/resistance, the 2009 lows.

This doesn't mean this rally can't continue but on a reward to risk basis the potential upside from here looks like it could be limited in the short to medium term.

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